Maybank IB says it continues to view Axiata’s overall risk-reward as being positive, with net profit recovery and balance sheet repair being potential re-rating catalysts. However, the house believes edotco’s intention to exit Myanmar would
likely imply additional time required to complete edotco’s equity raising.
Nevertheless, Axiata’s 10sen DPS is unlikely to be at risk based on estimates. The house reiterates a BUY call with an unchanged MYR3.50 SOP-based TP.
Likely a precursor to edotco fund raising Axiata had announced in its 4Q23 results release, of its intention to exit Myanmar. The Myanmar operations delivered MYR280m of EBITDA in FY23, and are now being reported as discontinued operations in Axiata’s financials. Axiata expects to complete the transaction in the next 12 months. Maybank IB believes the Myanmar exit is likely a precursor to any potential equity-raising at edotco, given the constraints faced by most international funds on investing in Myanmar. This would in turn, possibly imply additional time required to complete edotco’s equity raising, in its view.
10sen DPS should be intact
The balance sheet leverage is a major overhang for Axiata, with net debt to EBITDA having climbed to 3.1x at end 4Q23. The house’s previous simulation indicates every 10% new edotco equity raised would lower Axiata’s net debt to EBITDA by 0.11x-0.20x. Maybank IB said it does not expect Axiata’s 10sen FY24E DPS (amounting to MYR918m) to be at risk from any hypothetical delay in edotco fund raising, given improved enterprise FCF from EBITDA recovery at most op-cos, along with reduced pressure to repay debt.
Reiterate BUY
The earnings forecasts and MYR3.50 TP (derived from a sum-of-parts with each op-co valued on DCF) are unchanged, with associate CelcomDigi being the largest contributor of both earnings and SOP. Axiata remains committed to a minimum 10sen DPS annually.
